Sep 4, 2024 at 5: 16 pm

VC: Upgrade Your Value Creation Toolbox

How do venture capital managers around the world create value for their portfolio companies? We identified 20 levers and went deep into the topic at the Newton Venture Program.

Christian Rangen

4 MIN READ

This summer,I had the pleasure of teaching a module on venture capital value creation strategies at the Newton Venture Program at London Business school. Together with Tiffany Bain, Director, Value Creation at DFDF (Dubai Future District Fund) we explored how venture capital funds can shape a wide variety of value creation strategies. In engaging discussions with the excellent NVP cohort, we discussed personal experiences, shared insights on how to navigate challenges in value creation, and examined the strategic approaches that drive sustainable growth and success for startups in the venture capital ecosystem.

Hello, London!

The first time the program leadership at Newton Venture Program asked us to give a talk on value creation (technically, a cohort webinar), we realized we had some work to do. We were simply unable to articulate it well enough to our liking, and make it accessible for people to quickly grasp. The first webinar (2022) went well, but we wanted to do better, much better.

Thankfully, our friends at NVP were very receptive to exploring the topic in the classroom, this time equipped with our new insights, new materials and a world-class value creation practitioner, Tiffany Bain, from Dubai Future District Fund.

So, when the invite to run a module in London in the middle of Summer arrived, we were delighted to say yes.

Tiffany Bain presenting DFDF’s work on building out the VC ecosystem in the Middle East

Exploring Value Creation in Venture Capital

The background of the module was a series of ongoing interviews I had with fund managers across markets. We discussed how they approached post-investment, value creation with their portfolio companies. From PE funds in Africa, VC funds in Asia and early-stage investors, we talked about platform teams, emerging managers, small funds and large funds, and how they all have different approaches to venture capital value creation.

What emerged from that series of interviews was a profound insight into the multiple, different methods of value creation a venture capital investor can bring to the table. Both from a professional, structured way and a personal capability way, a VC investor has a rich toolbox to work with.

Following those interviews we wanted to capture this insight, leading to the creation of the GP Value Creation canvases. To make the topic even more tangible for managers, we developed the GP Value Creation Cards, a stack of 80 cards, shaped to help VCs reflect, discuss and evolve their own value creation strategies.

The 20 Levers of VC Value Creation

These 20 levers all represent different areas a venture capitalist can support their respective companies.

One Manager, at a seed-stage firm, may choose to double down on early business model iteration, go-to-market, young founder coaching and crafting a long-term capital strategy.

At another firm, investing more at Series A, the value creation process may be more aligned around extensive industry insights and expertise, building next stage financial management tools and helping out on talent and recruiting.

A late-stage fund, typically at series B or C, would be inclined to focus on growth strategy, world class board and governance, developing robust ESG and impact reporting and crafting an exit strategy.

In our research, we find no one single best practice, it is a function of fund stage, company maturity and the VC manager’s skills and personality.

Introducing the GP Value Creation Canvas

The GP Value Creation Canvas presents all 20 levers of value creation on one page – giving fund managers a full overview of where they stand in each category.

What’s your personal VC value creation playbook? Start by identifying your top levers.

From 20 Levers to 80+ Value Creation Cards

Digging deeper into our development, we identified a 1-4 scale on each of the levers, with 1 being ‘underperforming’ , 2 ‘performing’, 3 ‘overperforming’ and 4 ‘outperforming’.

Armed with this structure, we went to work to articulate a statement for each of the levers using the 1-4 scale

Exit strategy – on an underperforming to outperforming scale

In total, this structure gave us 80 unique statements, allowing any fund manager to identify strengths and weaknesses, opportunities and areas to improve.

Download the full deck of Value Creation cards with all 80 statements below

Click here to download the full deck of Value Creation cards

Heading Back to London

This was the toolkit and deck of cards we brought with us to London, Working in groups, the Newton Ventures participants got a chance to discuss their personal understanding of the 20 levers. They reflected on their personal value creation skillset, and finally developed their personal development path for sharpening their own, personal impact in the post-investment value creation process.

We are currently working with multiple funds to implement the new materials in ‘how we work’ and see very strong results in those early discussions.

While post-investment value creation still is an under-analyzed area in the field, we believe anyone, armed with the canvas and deck, can step up their game in just hours.